If you’ve landed on this blog you’re probably thinking about making a big business purchase. Yes, it’s time to buy a car for your business so you can more easily balance the duties of work and home life.
Either way, buying a business car is a big step. You will need guidance on best practices for buying a business car in Canada (or any vehicle, for that matter!) Don’t worry, we’ve got you covered with these tips.
Buying a Car for Your Business
1. When to buy the car under your business name
If the vehicle that you’re planning to purchase is going to be used for business purposes only it is best to make the purchase under your business name. You will also want to register the vehicle with insurance under your business name.
If you are going to use the vehicle for business purposes about 80% of the time it is still best to make the purchase under your business name and register the insurance under your business name. In this case, the vehicle is primarily business and not personal.
2. When to buy the car under your name
If you are a sole proprietor or an incorporation and you plan on using the vehicle for business purposes only half of the time, then it is best to make the purchase under your name and register the insurance under your name as well. In this case, the vehicle is primarily personal rather than business.
3. How to buy a business car for an employee
If you have an established business and you need to purchase a vehicle for an employee, you should first consider having your employee get a vehicle allowance per KM. Your employee can then expense their vehicle repairs and fuel under the T2200 Employee expense form.
It can get quite expensive for you as a business owner to purchase multiple vehicles for your business. It is easier for you to pay your employee a vehicle allowance and that way your employee is responsible for maintenance and costs associated with the vehicle.
4. How to log business car kilometres
If you are using the vehicle for business purposes 100% of the time, this part is a piece of cake. You will not need to keep a log of your KM.
If you are using the vehicle for both business and personal, you will need to keep a log of all personal use KM. This is where you will need the help of your accountant to record your personal use KM as a taxable benefit to you as a business owner.
You can download our free mileage log here!
5. How to keep track of business car expenses
If your vehicle is used for business purposes only, all vehicle expenses including gas, repairs, and interest will be expensed to the business.
If your vehicle is used for both business and personal purposes, you will need to keep all of your vehicle expense receipts throughout the year. Based on your accountant’s approach you may receive a vehicle allowance per KM or amount based on your yearly receipts.
6. How to transfer a car from personal to business
You may be an aspiring business owner who is ready to register or incorporate your business through CorePro8, but you purchased a vehicle a few months prior.
The best way to transfer the vehicle is to sell it to your business and change the registration and insurance to your business name. It’s important to keep in mind that although you’re selling the vehicle to yourself in a sense, you still need to sell it at market rate.
There are several steps that go into these big business purchases, and oftentimes new business owners struggle to find the right answers. Hopefully the guidance you received today will help you make good business decisions when it comes to your vehicle.
CorePro8 is your one stop shop to register and incorporate your business. We will guide you through each step of your business journey, and you will feel confident knowing that your business has been registered correctly.